Page 4 of the presentation shows that:
- North America's revenue grew by 24% and EBIT increased by 37%, while
- Australia's revenue declined by 1% and EBIT declined by 9%
The North American business is comprised of the distribution of Breville own designed & developed products, while the Australian business is a mix of Breville own products and white-label products sourced from China and labelled as Breville/Kambrook/Ronson.
The tough condition in the low end market has continued this year and doesn't seem to show any sign of getting better.
Therefore, I believe BRG's current strategic direction towards becoming a more nimble, innovative, high-end product design company is the correct one and really the only viable strategy if BRG wants to survive in the future.
Page 9 of the presentation shows some of the early benefits of the transformation that BRG is undertaking. A mysterious best in class product has been developed much faster than before, with the original target release date of Sep 2017, moved forward by a year to Oct 2016.
Not only that, BRG is attempting to launch the product simultaneously in all of its key markets of Australia, NZ, UK, US and Canada.
The Nespresso partnership has also been extended to include US & Canada. Beside generating its own revenue and earnings, this partnership will also help in increasing Breville's brand awareness in these important key markets.
A new consolidation warehouse in China that is going to open in Feb 2017 will also assist BRG in making its supply chain much more efficient.
A business that wants to excel in innovation has no choice but to invest in R&D & marketing. Page 17 of the presentation confirms that this is exactly what BRG plans to do.
Cost structure re-allocation toward marketing and R&D
What this basically means is BRG is going to use the cost savings achieved from various efficiency programs to invest in R&D & marketing.
As a long term shareholder, I very much support this strategy.
Ann: Year Ended 30 June 2016 - Investor Presentation-BRG.AX, page-2
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